Your Reputation Has Transcendent Value
Its invocation may not be obvious, but reputation is “usually something we’re constantly working on in the background,’ argues Fi360 Executive Chairman Blaine Aikin. And reputation — building, maintaining and living it — permeates everything from meeting regulatory requirements to the finer points of interacting with and serving clients.
Aikin made his remarks in a May 2 workshop session at the Plan Sponsor Council of America’s annual conference in Scottsdale, AZ.
Reputation is a central consideration for fiduciaries, argued Aikin. The very term is premised on trust, he observed, noting that “fidu” itself comes from “fiducia,” Latin for “trust.” And fiduciaries, he said, “must build a relationship of trust.”
It is important in fiduciary functions to consider federal law and regulation, he indicated, citing ERISA, the Advisers Act and the Exchange Act as laws meriting special attention. But the federal backdrop us not static, he cautioned, remarking, “We’re in a constant state of change,” regarding regulation, the economy and the market, “and we’ve got to be able to adapt to that.”
The need to act honorably transcends legal and regulatory dictates, Aikin argued. For instance, he said that if the DOL’s fiduciary rule goes away, one “still must operate at that high level and standard.” Not only that, he said, “You have a responsibility to know what’s going on in the marketplace, but to maintain your reputation, step aside from the regulatory sphere and hold yourself to a higher standard.”
Regard for one’s reputation also can be helpful in that by doing so, “we leave less to chance,” Aikin noted; still, he cautioned, pursuing one’s self-interest can be a problem and can result in conflicts of interest. He argued that a different orientation — toward others instead — is preferable. “To the extent that we replace self-orientation with a service orientation, the better off we are,” he said. In being reliable, Aikin said, one should operate with the mindset that “I not only need to be credible, I need to be delivering constantly.”Core Principles
Aikin suggested eight core fiduciary principles that are of critical importance:
1. Follow laws and governing documents
2. Diversify to manage risk and return
3. Prepare and follow an investment policy statement
4. Use prudent experts
5. Control costs
6. Avoid conflicts
7. Monitor fulfilment of fiduciary obligations
8. Foster continual improvement
“If you have these nailed,” said Aikin, “you are being intentional about managing relationships and building reputation.” And he warned, “If there is a problem with fiduciary practices, that undermines your reputation.”
Aikin stressed the importance of monitoring and stressed that it is necessary to be engaged in it, telling attendees that “it’s the one function that is never delegated.” And, he said, “where this comes from is not just best practices, but is fully substantiated in the law.”Steps to Take
Aikin suggested concrete steps that can be taken in building and maintaining your — and your firm’s — reputation:
1. Choose your service providers wisely – your reputation may depend upon them.
2. Conduct an assessment of your fiduciary practices.
3. Consider a CEFEX assessment and certification to verify conformity to standards of fiduciary excellence, and that such a certification:
- signifies that an organization is worthy of trust and confidence;
- results in a CEFEX-certified firm being listed in an independent public registry;
- promotes fiduciary excellence and continual improvement; and
- mitigates regulatory, litigation and reputational risks, and saves on fiduciary insurance costs.
“Reputation is your highest and best asset,” said Aikin, adding “It is the most valuable asset you possess.”